Inflation is rising sharply due to several underlying economic factors, such as supply-chain bottlenecks, labour shortages and strong consumer demand. COVID and the Ukraine war disrupted supply chains globally and mainly affected food and energy prices. Some of these bottlenecks are now fading but prices continue rising.
The inflation rate in Malta is lower than that in most other EU member states but still at the highest level for at least four decades. Families struggle to make ends meet and are not convinced that all price increases are due to inflation. And they are right to have such suspicions.
Prime Minister Robert Abela said some businesses may be taking advantage of the current trading challenges to prey on consumers by hiding behind rising inflation. They are inflating prices up by even more than necessary to cover their higher costs.
Abela observed that the government had managed to rein in inflation through measures such as the freeze on energy prices. Yet, many are still struggling with hefty prices despite the fact that shipping costs from China are now down practically to their former level.
Price gouging is not a new practice. It can be defined as raising prices on certain types of goods and services to an unfair level, especially during an economic crisis.
Price gouging masquerades as inflation. It is doubtful the prime minister would have raised these concerns had he not been in possession of information that some companies are exploiting the situation to boost their profits at the expense of vulnerable consumers.
“Greedflation” is a new catchy term that describes the urge of certain businesses to make hay while the sun shines.
Some are clearly capitalising on the government subsidy stimulus of the last three years, which left people with extra cash that may now be leading to a surge in demand.
The economy continued to perform well in the last two years thanks to generous fiscal incentives awarded to businesses and families, as well as subsidies on fuel and food prices.
But the cost of goods and services keeps going up at what looks like an unreasonable rate and in a free market economy it is difficult to control it. Companies know that consumers somewhat expect higher prices right now and some are testing how far they can push that.
Some companies, especially those enjoying dominant positions like banks and audit firms, have raised their fees exponentially on the pretext of rising labour and regulatory costs.
While business lobbies have complained about these exorbitant increases, consumer organisations have said little about the price hikes of everyday consumer goods, some of which are basic supermarket items.
Trade unions have been almost conspicuous by their absence in their protests despite the adverse economic developments which impacts workers and their members badly.
While it is difficult to enact effective legislation against price gouging, more militancy by unions and consumer associations could be instrumental in easing the pressure on families.
Consumer organisations need to do their research and name-and-shame those businesses that are increasing prices beyond reasonable limits.
This is nothing but short-sightedness because unnecessary price inflation will once again lead to higher cost of living allowances, which employers would have to foot anyway.
It could also lead to an inflationary spiral as trade unions clamour for wage increases that, in most cases, do not keep pace with inflation.
A lot of businesses make enough profit to enable them to shoulder some of the burden the average family has taken on in crisis after crisis.